How Do Auto Insurance Deductibles Work?

Navigating the wide range of coverage types and other industry-specific jargon in your automobile policy is often a difficult process. One of the most overlooked and misunderstood portions is your insurance deductible. We’re going to explain what an auto insurance deductible is and how it works. Additionally, this review will offer 4 tips to help you pick the right deductible amount for you.

How Do Auto Insurance Deductibles Work?

The first section of our article on how do auto insurance deductibles work is going to explain what a deductible is. In short, a deductible is the amount of money you are responsible for paying before your auto insurance company starts to pay out.

Deductibles are also common in other insurance products like tax deductible and work somewhat similar. However, this article is going to solely focus on the auto insurance side of things in our explanations.

Auto Insurance Deductible Values

Depending on your policy, the deductible amount can vary substantially. In general, the higher your deductible is, the lower your average premium payment will be for your insurance. The exact deductible amount will vary slightly based on your auto insurance company.

The most common deductible amounts you will encounter while shopping for insurance are zero, $250, $500, and $1,000. The state you live in also plays a direct role on what the minimum and maximum deductible amounts are for your area.

Auto Insurance Deductible Coverage

In addition to the deductible amount, it’s also important to understand that the different coverages on your automobile policy will likely carry different deductible amounts. Two of the most common coverage types to take a look at are collision and comprehensive.

For collision coverage, this typically covers the repair or replacement of your vehicle from colliding with another car or object. It also covers other activities like rollovers due to inclement weather conditions.

With comprehensive coverage, the covered damage is usually related to weather events. You can receive deductibles even in cases where the car was damaged when you weren’t in the vehicle. Common examples of damage types that are covered by this category include hail damage, theft, as well as vandalism.

4 Tips For Picking The Right Auto Deductible Amount For You

a. Consider Your Age

The first tip we will offer in our article on how do auto insurance deductibles work is to always consider your age. For younger drivers, you will have a tendency to be more at risk than an experienced driver. This has nothing to do with you as a person. It is simply related to you being a new driver.

As a result, you may want to consider carrying insurance with a lower deductible amount. This will help ensure that you have enough funds to get your car repaired in the event you have an unfortunate accident.

For elderly drivers, it may be worth considering picking a lower deductible option as well. While elderly drivers are much more experienced, health problems and slowed reaction times can lead to an increase in accidents as well. It’s always best to consider your overall health and any relevant medical conditions you may have when making a decision about your deductible.

b. Take a Look at Your Finances

The second tip we will offer in our article on how do auto insurance deductibles work is to take a look at your overall financial picture. As mentioned earlier, you will save money on your monthly insurance premium by opting for policies with higher deductible amounts.

This can be particularly beneficial for individuals who do not have much of discretionary income each month. To really get the most out of this type of situation, it is strongly recommended that you set aside a bit each month. This way, you make sure you have enough money saved up to meet your deductible payment. Moreover, you can be sure to have the funds necessary to cover your portion of a repair bill after an accident.

On the other side of things, opting for a lower deductible amount can prove to be particularly beneficial. This works especially for people who have a hard time saving in general. This can aid mitigate the risks associated with having to cough up a substantial deductible payment before your insurance company covers their side of repairs.

c. Don’t Forget Your Local Weather Conditions

This is one tip that we had to make sure to include in our how do auto insurance deductibles work article. When deciding on a deductible that is right for you, you should take into account the types of weather conditions you commonly experience in your area.

As mentioned earlier, one of the auto insurance coverage types is comprehensive. This covers damage from a wide range of sources including wind and hail. One of the most common repairs that comprehensive coverages pay for is windshield replacements and repairs. If you live in an area that is prone to these types of conditions, you should consider opting for a lower deductible on your comprehensive coverage.

Keep in mind that certain state laws may waive deductible requirements for specific types of damages. A prime example is windshield repairs in Florida. Be sure to ask your insurance agent about any similar laws in your area that may help you save money as well.

d. Don’t Forget about Discounts

While not a tip related to your deductible per se, this is another important thing we decided to include in our how do auto insurance deductibles work article. When shopping for insurance, remember to ask about any relevant discounts you may qualify for.

Some prime examples of common discounts include good students, membership in a variety of professional organizations, and safe driver. Moreover, you may benefit certain safety features that may be on your car. You can also save by bundling your policy with other insurance options like house and rental insurance.

Using your savings, you can then decide to opt for a lower deductible amount than you would typically be able to afford. Even if you decide to stick with a higher deductible, the savings you achieve each month will help you with a wide variety of other financial goals.

Final Thoughts

At this point, you should now be able to confidently answer how do auto insurance deductibles work? Using the 4 tips outlined above, take a look at your automobile policy and make any changes you may need. If there are any tips you would like to share, feel free to post them in the comments section.

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